Kraehe soothes risk nerves at NAB

National Australia Bank's new chairman Graham Kraehe says it is important that the bank does not overreact to its $360 million foreign exchange trading scandal by dramatically and needlessly curtailing its exposure to risks.

Analysts have been concerned that a likely overhaul of NAB's risk management systems in the aftermath of the drama would come at a cost to profits. But Mr Kraehe told The Age: "If you look at the major risk (at a bank), it's credit risk. We have an outstanding credit book and a very good profile in our credit book, and it's important we don't overreact to this issue.

"While it's high profile and reputationally damaging, it's in a very small part of the organisation."

Mr Kraehe, who this week replaced Charles Allen in the wake of the forex losses, also rejected any claims of responsibility for the woes that beset Southcorp following his exit as chief executive in 2001.

"I joined Southcorp as chief executive in 1994 and I retired as planned in March 2001," he said.

"Within that time frame, the share price rose from $2.68 to about $6.50 and its market capitalisation more than doubled and the profit more than doubled. I retired from Southcorp and resigned from the board before the decision was made to acquire Rosemount, which has been an unfortunate episode. My time at Southcorp I am very comfortable with and people can look at the facts.

"I bring a lot of relevant experience to the role and I believe I can do a good job for NAB."

Mr Kraehe has already come under pressure about his role on the NAB board, particularly as chairman of the risk committee.

Asked if the board knew of warnings last year by the regulator about risks in the bank's forex area, Mr Kraehe said the Australian Prudential Regulation Authority communicated with NAB all the time as part of the "daily interface between the regulator and us".

PricewaterhouseCoopers, which was working with APRA in its investigations into the forex losses, would investigate "any external input" including advice from competitors that would have warned NAB. "We are not going to comment on APRA and it's difficult to comment on our regulator whilst the investigation is going on, however we will when we hand down the PwC report," Mr Kraehe said.

Mr Kraehe and new chief executive John Stewart met with big investors and analysts this week in Sydney and Melbourne.

Mr Kraehe said: "I asked (analysts and investors) to give us a hard time and in some cases they did. Generally they were constructive."